How a Pension Changes How Much You Need to Retire
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The decisions on how to invest, when to retire, and other financial planning topics are some of the most important financial decisions you will make in your life. I urge you to seek professional financial advice as you make this decision. Ideally, from a financial adviser, AND a CPA AND an attorney. Having the perspective of all three professions will help you make the right decision for you and your family.
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A pension can be a crucial component of a retirement plan, providing financial security and stability during the later stages of life. Understanding how a pension can change your retirement plan is essential for ensuring a comfortable and stress-free retirement.
First and foremost, a pension can significantly impact your retirement income. Pension payments are typically received monthly and are designed to supplement other sources of retirement income, such as Social Security benefits and personal savings. This steady stream of income can be a game-changer for retirees, as it provides a reliable source of funds to cover living expenses, medical costs, and leisure activities. With a pension, retirees can feel more secure in their financial future and have peace of mind knowing that they have a consistent income to rely on.
In addition to providing regular income, a pension can also impact your tax liability in retirement. Depending on the type of pension you have, your pension payments may be subject to federal and state income taxes. However, some pensions may be partially or fully exempt from taxation, depending on factors such as the amount of your pension, your age at retirement, and whether you made after-tax contributions to the pension fund. Understanding the tax implications of your pension is essential for proper retirement planning, as it can affect how much of your pension income you actually get to keep.
Furthermore, having a pension can influence your overall retirement budget and spending habits. With a reliable pension income, retirees may feel more comfortable spending money on travel, hobbies, and other leisure activities. This can lead to a more fulfilling and enjoyable retirement lifestyle, as retirees are able to do the things they love without having to constantly worry about their financial situation. On the other hand, retirees may also need to be mindful of how they manage their pension income to ensure it lasts throughout their retirement years. Proper budgeting and financial planning are crucial for making the most of your pension and ensuring a financially secure retirement.
It’s important to note that not everyone has access to a pension, as fewer employers offer traditional pension plans than in the past. In these cases, individuals may need to rely solely on their personal savings, Social Security benefits, and other retirement accounts to fund their retirement. However, for those who do have access to a pension, it can make a significant difference in their retirement plan.
In conclusion, a pension can have a substantial impact on your retirement plan, affecting your income, taxes, budget, and overall financial security in retirement. Understanding how a pension fits into your retirement plan and how it can change your financial situation is crucial for a successful and comfortable retirement. With careful planning and proper management of your pension income, you can enjoy a fulfilling and financially secure retirement.
Retirement becomes truly fulfilling when you possess two essential elements: ample financial resources and a meaningful purpose in life. Make prudent investment choices to secure good returns and ensure a comfortable retirement.
A good pension beats any 401k plan. Pensions don’t lose 25% taxes on cash out and they last forever unlike a 401k that loses monthly
This person would only run out of "invested" money. Worst case, they rely solely on a pension and Social Security benefits.
As of late, I have been thinking about retiring, but I'm not sure that my 401(k) and IRA will provide me with a stable future. I've also made a $800,000 stock market investment, though I haven't made any significant gains.
retirement is always going to be made.. I prefer to keep making money
just sold a property in Portland and I'm thinking to put the cash in stocks, I know everyone is saying its ripe enough, but Is this a good time to buy stocks? How long until a full recovery? How are other people in the same market raking in over $200k gains with months, I'm really just confused at this point.
How much do I expect to spend on a fee only financial advisor for an analysis like this? Like an $average in PNW? Thanks.
Most people don’t realise it, but the secret to retiring comfortably is finding a way to make returns while your money works for you. My dad, as I remember, started saving for retirement quite late, but I know he was making more than 10k returns from his investment monthly and it was completely passive.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determines a lot of things, my parents both spent same number of years in the medical profession, my mom was investing through a financial advisor while my dad through the 401k. On retirement, my mom retired with about $5million, while my dad retired with roughly $3.8million.
Thanks! A fun tool (well, for a quasi data nerd). Lots of fun to play with, adjust assumptions.
8% per year increase in SS for waiting isn’t accurate
I use the New Retirement software free version.
Azul, I watched your video to the end and didn't see or hear you give us the link to the free planning tool. I also checked your video description.
Azul just a small point, you may run out of savings but you still receive your pension and social security. So a little distinction in wording, money will continue to arrive in your bank account from two sources one with cost of living adjustments. Got it, you will have to adjust your living but just like all advisors say GO-GO, Slow Go and No Go years will change your spending anyway.
My state uses Empower as its employee contribution custodian, so I've played quite a bit with their retirement planner. I have to question the 'running out of money' scenario when a retiree has SS and a pension. Unless I incur some sort of debt that can garnish those bits of income, I should never really reach zero. I'm not saying that's a wise strategy element, but with a pension / SS, I should never be hand-to-mouth.
Hey Azul I have a question for you. My company has a pension (private company) but it does not have a cost of living rider to it for inflation, like you said is very common except for some jobs like government. If my company offers a lump sum payment (minus the taxes – ouch) is it generally a good idea to take it? I could invest it in a S&P 500 Index fund and at least make up for inflation with returns. But of course it would take me time to recover from the taxes taken out. Thanks! greg
I'm lucky enough to have a defined benefits pension in the uk they are like gold .
Can you please provide the link to the tool used in the demonstration? it does not appear at the end of the video, only a link to another on of your videos appears.
If I had a pension, I'd already be retired
I've been keeping a substantial amount of my savings in cash. It feels safe, but I wonder if it's the right approach for retirement. I want to invest roughly $400K in stocks since I've heard that even in challenging times, investors may turn a profit. Any excellent ideas for stocks?.
Understanding you're not a tax specialist, I'd love to see a similar video that adds the following to your discussion/considerations: looking at the long-term tax and Monto Carlo simulation differences between taking SS earlier, e.g., 62, to put off dipping into more of your retirement portfolio (e.g., traditional IRAs/401K) to cover your early retirement cash flow needs vs. waiting to take SS until full retirement and therefore needing to tap into more of your retirement portfolio earlier to meet your cash flow needs. I get that our SSI will increase each year we put off taking it, but what's the comparison consequence of doing so for tax purposes and Monto Carlo portfolio longevity simulation purposes? Assume you're in a state that taxes SS and retirement income. … Love your channel. TIA.
Azul, curious if you have any clients or know anyone who’s actually run out of money. I know plenty who never had much to begin with, but never any who spent it all before they expired.
The government has really called things more difficult for its citizens, and we can't sit back and bear all the consequences of the bad governance.It's obvious we are headed for hyperinflation, it is always the poor who take the hit.
The wisest thought that is in everyone's minds today is to invest in different income flows that do not depend on the government, especially with the current economic crisis around the world. This is still a good time to invest in gold, silver and digital currencies (BTC, ETH…. Stock)